Definition

Enterprise city means a city developed by private enterprises equipped with primary functions such as industry, research, tourism, leisure, and business, and self-sufficient multi-functions such as housing, education, medical services, and culture according to Article 2 of the Special Act on the Development of Enterprise Cities.

According to the article amended on May 30 of 2015, enterprise city was not classified any longer to allow developers to be more flexible with projects.

However, the Article 30 of the permission for a casino business or support for tourism promotion and development fund that applied to the project of tourism and leisure enterprise city before the above amendment is now applicable only to the project of enterprise city that has main functions - tourism and leisure – compared to other enterprise city projects.

Designation of Enterprise City

Requirements for Designation

To be designated as a development zone of enterprise city, the development project shall satisfy all of the following requirements.

Requirements for Designation of Enterprise Cities

	Requirements
Size	The size of a development zone shall be at least 3.3 million square meters; for tourism and leisure enterprise cities, the size shall be at least the size prescribed by Presidential Decree.
Location	A development zone shall be available except for the metropolitan area.
Growth Poles Development	For a development project of unused land around corporations or universities, the size of a development zone shall be reduced to 100,000㎡.
Locality	The development project shall represent the characteristics of the region.
Securing of the Land	Where local governments express enthusiasm in and residents show support for the development project, it shall be easier to secure the land.
Sustainable Development	The sustainability of the development project shall be considered along with its effects on local economy.

Source : Ministry of Land, Infrastructure and Transport (2013.10.4). The Procedures and Selection Criteria of Tourism and Leisure Enterprise City; Ministry of Land, Infrastructure and Transport (2015.12.15). Information on the Development of Tourism and Leisure Enterprise City.

Requirements for Project Operator

The criteria for the designation of a project operator under Article 10 (3) of the Special Act on the Development of Enterprise Cities shall be as follows:

A private company that has established a consortium company responsible for the execution of the relevant development project shall be satisfying at least three of the following requirements: (a) Its equity capital in the latest year shall be at least 100 billion won; (b) Its gross sales in the latest year shall be at least 500 billion won; (c) The ratio of liabilities in the latest year shall be less than 1.5 times the average of the companies in the same field of business; (d) Its business has generated operating income, ordinary income, and net income continuously for the latest three years; (e) The ratio of net income to equity capital has remained at least five percent over the latest three years, and the cash flow from business activities is positive.

Where at least two private companies establish a company exclusively responsible for the execution of a development project, the private company that has invested the most shall be ranked a legitimate investment grade (BBB) in the evaluation on corporate bonds or corporate credit rating for the latest year.

Requirements of Project Operator

	Requirements
Financial Soundness	A private company who intends to be designated as a development project operator shall cover not less than ten percent of the costs incurred for city formation.
Funding and Investment Plans	A private company who intends to be designated as a development project operator shall establish a development plan that is smarter and more feasible, and guarantee stable business operation.
Locality / Cooperation with Local Governments	A private company who intends to be designated as a development project operator shall plan shall a business that reflects the characteristics of the region, and improve communication with local governments.

Source : Ministry of Land, Infrastructure and Transport (2013.10.4). The Procedures and Selection Criteria of Tourism and Leisure Enterprise City.

Enterprise Cities in Operation

As of 2015, two tourism and leisure enterprise cities and two knowledge-based enterprise cities are in operation.

Enterprise Cities in Operation

	Tourism and Leisure Enterprise Cities		Knowledge Based Enterprise Cities
Location	Youngam · Haenam	Taean	Wonju	Chungju
Area	34,817,000㎡	14,644,000㎡	5,290,000㎡	7,009,000㎡
Cost	3,525.7 billion KRW	1,146.2 billion KRW	948 billion KRW	430.8 billion KRW
Facilities	Motor sports, golf courses, marina, meditation resort, Namdo Food Culture Village, etc.	Multi-functional complex, theme park, international business center, youth culture park, etc.	Advanced healthcare industry, health and biotechnology industry complex, science park, research facilities, etc.	Parts and materials business, convention center commercial and residential building, multi-purpose sports facilities, etc.
Progress	The Guseong Zone project started in 2013. The Sampo Zone plan was approved in 2010. The Samho Zone plan was changed in 2010.	The 3rd changes of execution plan was approved in December 2011. The construction of 2 18-hole golf courses started in October 2012. The construction is 27% completed as of December 2014.	The 3rd changes of development plan and 2nd changes of execution plan were approved in July 2011. The construction is 30% completed as of December 2014. The 20% of buildings is sold.	The construction is completed in December 2012. The 70% of buildings is sold.

Source : Ministry of Land, Infrastructure and Transport (2013). Progress of Tourism and Leisure Cities; Federation of Korean Industries (2013). Development Strategies for Tourism and Leisure Cities; Ministry of Culture, Sports and Tourism (2015). Korean Tourism Annual Report 2014.

Investment Incentives

According to Article 26 of the Special Act on the Development of Enterprise Cities, the State and local governments may grant the reduction of or exemption from national taxes and local taxes to enterprises poised to move into the development zones and from the rental fees for State and public property to operators or enterprises poised to move into the development zones.

According to Article 30 of the Special Act on the Development of Enterprise Cities, the Minister of Culture, Sports and Tourism shall grant permission for a casino business if it is reflected in an implementation plan for a tourism and leisure-type enterprise city, and the criteria and procedures may be separately established by Presidential Decree if a tourism business facility is sold by units or memberships are invited into a development zone.

The rate of land an operator shall directly use is changed from 50 percent to 20 percent: Provided, That when he/she is bankrupt, such rate may be reduced to 10 percent as prescribed by Presidential Decree.

the building coverage ratio or capacity is available within the scope of 150/100 at maximum

floor area ratio

The head of the metropolitan city/special self-governing city having jurisdiction over or city/county located in the development zone shall change the floor area ratio determined by its ordinance to a maximum of 150 percent.

Investment Incentives of Tourism and Leisure city Type

	Incentives			Related Laws
Tax Reductions or Exemptions	Where the amount of foreign investment is at least 10 million USD.	National tax1) (corporate tax / income tax)	5 yrs. (100%/3 yrs. & 50%/2 yrs.)	Article 25 (1) of the Special Act on the Development of Enterprise Cities
		Local tax2) (acquisition tax / property tax)	5 yrs. (100%/3 yrs. & 50%/2 yrs.)
	Where the amount of foreign investment is at least 30 million USD. Where the foreign investment ratio is at least 50/100, and the total development project costs for the relevant free economic zone or Saemanguem project area are at least 500 million USD.	National tax1) (corporate tax / income tax)	5 yrs. (50%/3 yrs. & 25%/2 yrs.)	Article 121 (2), (6), and (7) of the Restriction of Special Taxation Act Article 116 (17) and (18) of the Enforcement Decree of the above act
		Local tax2) (acquisition tax / property tax)	5 yrs. (100%/3 yrs. & 50%/2 yrs.)
Charges Reductions or Exemptions	Development charges Farmland preservation charges Costs of development of substitute grassland Expenses for creation of alternative forest resources Charges for exacerbating traffic congestion			Article 25 (2) of the Special Act on the Development of Enterprise Cities
Rental Fees for State and Public Property	The reduction rate of the rent for State property shall be determined by the head of the central administrative agency responsible for the management of the State property within a maximum of 20/100 of the rent for the State property.			Article 26 (3) of the above act Article 35 (2) of the Enforcement Decree of the above act.
Financial Support	The State may fully or partially provide financial resources necessary for the development and expansion of infrastructure in development zones, such as access roads to zones, water supply facilities and sewage treatment facilities. The Minister of Culture, Sports and Tourism may provide or lend the tourism promotion and development funds to local governments or operators for the construction of infrastructure, etc.			Article 34 of the Special Act on the Development of Enterprise Cities
Special Cases of Tourism Promotion Act	The Minister of Culture, Sports and Tourism shall grant permission for a casino business if it is reflected in an implementation plan for a tourism and leisure-type enterprise city and meets all of the following requirements: The applicant shall be an operator who invests at least 500 billion KRW in tourism business or 300 billion KRW when applying for permission to a casino business; The applicant shall have a casino established in a hotel or a conference facility; The applicant shall secure facilities, equipment, human resources, etc. necessary for the casino business. If a tourism business facility is sold by units or memberships therefor are invited into a development zone, the criteria and procedures therefor may be separately established by Presidential Decree.			Article 33 of the above act
Living Conditions	Where an operator intends to install and operate a medical institution to secure the medical service infrastructure of the relevant enterprise city, he/she shall prepare a development plan and implementation plan that includes a plan for the installation of the medical institution. A foreign educational foundation shall establish and operate a foreign educational institution (excluding schools under Article 2 of the Elementary and Secondary Education Act) within a development zone.			Articles 37 and 38 of the above act
Approval or Permission	With regard to the permission, authorization, designation, approval, consultation, report, etc. for the implementation plan, the relevant authorization, permission, etc. shall be deemed obtained, and if the implementation plan is published, the authorization, permission, etc. shall be deemed published or publicly announced. If necessary to undertake a development project within a development zone, the operator may expropriate or use land, goods, or rights.			Articles 13 and 14 of the above act

1) Where the sum of the reduced or exempted income tax or corporate tax exceeds the sum of the following amounts, the ceiling on
the tax reduction or exemption shall be such sum:
a) 50 percent of the cumulative investments; b) The lesser of the following: (1) Number of workers at ordinary times in the relevant taxable year x ten million KRW; (2) 20 percent of the cumulative investments.

2) Some local governments grant longer reduction or exemptions periods up to 15 years by their ordinance.